Originally published in The Next Web. When it comes to attracting investors, the startup pitch…
What is the Difference Between Incubators & Accelerators?
When you get into the startup game, you hear the terms “incubator” and “accelerator” in your conversations with other founders and entrepreneurs. Maybe you have a friend whose company is working with an incubator, or you attended an event hosted by an accelerator. It can be easy to assume accelerators and incubators are one and the same for startups, but they each are different in what kinds of companies they help bring in, as well as what they are looking to provide in return.
So what IS the difference between incubator and accelerator programs for startups, and is either option right to grow your business?
Incubators bring in early-stage companies to help develop their ideas with assistance in the form of office space, resources, mentorship, and access to experts in the startup ecosystem. In exchange for this assistance and mentorship, the investor or investing team will receive a key percentage of equity in each company. There is usually no time limit for participating; each company is brought along at its own pace, usually until it becomes self-sufficient enough to begin operating independently.
The primary difference between accelerator and incubator programs is that the former implies a more expedited process, and that is what you get. Businesses that gain acceptance into an accelerator program are looking for resources and mentorship guidance to catapult them to their next milestone. Programs last just a few months (usually three) before new companies are set off on their own again. Investors will offer up investment capital or funding and act as mentors in exchange for a key percentage of equity in the company. This percentage is generally less than what would be requested from an incubator.
What’s the process for applying for startup incubators and accelerators?
Despite the considerable difference between incubator and accelerator programs, the process is the same if you want to apply to either one. Requirements like market conditions, the potential profitability of your idea, and other success indicators are often taken into account.
However, even though there has been a big jump in the number of both incubators and accelerators cropping up in major markets across the country, it can still be pretty tough to get in. The most popular incubator/accelerator programs reject hundreds of new applications each year. Y Combinator, a top incubator in the Bay Area, has to turn down so many great companies/ideas that they have a page up on their website that explains why they weren’t selected for support, mentorship, or other key differences.
Incubator vs. Accelerator: Which Should You Choose?
Even though they both help startups, the difference between incubator and accelerator programs is very distinct. If you’re considering either, the first crucial decision you need to make is this: accelerators vs incubators—which one does your company need RIGHT NOW to start you on the road to success?
Think carefully about what stage your business is in before deciding which route to go. If you are still working through important details such as market fit, your business model, product development, or even just the right elevator pitch, then an incubator may be the ideal option. If you’re at the MVP stage, have solid financial planning, and need expert mentorship & support on how to proceed to the next stage of your company’s growth & development, an accelerator is the better choice of the two.
So the difference between incubator and accelerator programs is clear enough that most companies can often tell which way they lean more towards. But if you’re still stuck, it would be a great opportunity to take a look around you. Learn what other founders and entrepreneurs in a similar stage are doing. What is their current focus? If you already have a mentor or advisor, can they provide any key recommendations? Don’t be afraid to tap into your existing network to get additional input if you can’t decide whether to go on an accelerator vs. incubator route.
Questions? Contact Early Growth